House of Representatives Committees

Chapter 2 Review of National Broadband Network Rollout Progress

Introduction

2.1The Government’s National Broadband Network (NBN) rollout Performance
Report (the Performance Report) was provided to the committee on 23 September
2011. The content of the Performance Report is based on information provided by
the NBN Co to Shareholder Ministers under its obligatory reporting arrangements
and includes:

nA summary of the key
milestones achieved by the NBN Co.

n[Unaudited] Year to
date financial reports for the period ended 30 June 2011, including profit and
loss statements, [a balance sheet] and a consolidated statement of cash flows.

nMeasurement against the
NBN Co’s Key Performance Indicators (KPIs) as at 30 June 2011.[1]

2.2Issues raised through examination of the Government’s Performance Report
are included in the relevant chapters of this report. This chapter outlines and
discusses a number of the issues associated with both the qualitative and quantitative
information contained in the Performance Report, and the timeframe during which
the committee has received this information. In addition, comment is made on
how the committee may be able to participate in the consideration and development
of KPIs and measures.

Performance Reporting

Reporting Intervals

2.3On 7 July 2011, the Shareholder Ministers wrote to the committee advising
that the Government was in the process of ‘finalising an appropriate reporting
framework including key performance indicators on NBN Co’s activities, which
[could] be used as a basis for reports to both the Government and to [the]
committee.’[2]

2.4The Shareholder Ministers indicated that performance information on the
NBN rollout in the form of an update (which would be based on information
received from NBN Co) would be provided to the committee by mid September
2011.[3]

2.5The Shareholder Ministers explained that providing this information
earlier presented ‘practical challenges’ and stated mid September timeframe would
ensure enough time for such a report to be drafted and for the inclusion of
recent NBN rollout developments. The Shareholder Ministers stated:

For the first report, there are practical challenges to
providing the committee with appropriate material before mid September. It is
important to ensure that there is time for NBN Co management to prepare a
report of satisfactory quality, for the NBN Co Board to perform appropriate due
diligence in reviewing the content of the report, and for initial Government
consideration of the report. This timing would also ensure that the Government
is able to provide the committee with relevant information surrounding recent
developments as part of its first report.[4]

2.6On 18 August 2011, the committee informed the Shareholder Ministers that
it had noted the timeframe of mid September 2011 for receiving the Government’s
Performance Report. Taking into consideration the mid September reporting
timeframe, the committee indicated it would arrange a public hearing on 20
September 2011 to examine the Performance Report.

2.7In view of the Government’s mid September reporting date, the committee
also proposed that under its Resolution of Appointment (RoA) it would report to
the Parliament by 31 August 2011, and then seek to amend its RoA to enable it
to report in June and December instead of August and February.

2.8In addition to providing further opportunities for examination of the
Performance Report, the purpose of the committee’s proposed new reporting
timeframe was to enable the performance reporting period to align with existing
NBN Co reporting arrangements in place with the Shareholder Ministers. This
would assist in avoiding duplication of the reporting process on these matters.
This timeframe would also enable the committee to undertake a more thorough
examination of NBN rollout issues.

2.9Referring to performance reporting, in its First Report the committee
found:

nFor NBN targets and
KPIs, the committee expected the KPIs and performance measures to be resolved
between the NBN Co, the Department of Broadband, Communications and the Digital
Economy (DBCDE) and the committee as a matter of priority.

nIn regard to the
Government’s mid September 2011 reporting timeframe, at the earliest, the DBCDE
and the NBN Co were aware of the committee’s terms of reference and its August
reporting date at its establishment in March 2011 and could have anticipated
the committee’s requirements in terms of reporting on NBN data. In addition,
the committee made repeated requests to the DBCDE and the NBN Co for data on KPIs
for the NBN rollout and performance measures.

nThere would be a benefit
in receiving NBN rollout performance information on a six-monthly basis, in
line with its expected June/December reporting timetable, so that short term
and long term trends could be easily identified, examined and possibly
benchmarked.

2.10As a result of these findings, the committee recommended:

nthat the NBN Co and the
DBCDE, commencing for the first quarter 2011-12, provide a six-monthly report
on the progress of the rollout of the NBN, using established KPIs and
performance measures, no later than three months before the committee is due to
report to the Parliament.[5]

NBN Co Reporting Requirements

2.11The Government’s[6] Statement of Expectations
(SoE) outlines the NBN Co’s responsibilities in respect to planning, reporting
and performance management in line with its obligations as a Government
Business Enterprise (GBE).[7] The SoE states the
purpose of the NBN Co’s regular report will enable the Government to ‘measure
NBN Co’s performance.’[8]

2.12As part of its planning, reporting and performance management responsibilities,
the Government expected that the NBN Co would:

nReport regularly to
the Government to enable NBN Co performance to be measured. This includes
reporting through an annual report and interim reports as required.

nInclude in its annual
report details on the NBN rollout cost and performance, achievement of service
levels, faults, customer complaints, details of its progress towards meeting
its coverage objectives and any expenditure incurred as a result, and other
matters as advised by the Shareholder Ministers.

nIn consultation with
the Government, develop KPIs to enable monitoring against the NBN Co Corporate
Plan and Business Plan.

nContinue to report to
the Parliament and its committees, with particular reference to this committee.

nDuring the NBN
rollout, develop a comprehensive strategy for engaging with individual
consumers, including a complaints handling mechanism, and regularly report against
this strategy to Government.

nIn line with its
practice of publishing a number of consultation, position and option papers about
its planning, strategy development and operations, ‘continue to conduct its
planning and the execution of its strategy in a publicly transparent manner
subject to any requirements for commercial confidentiality, and reflect this in
its annual reporting.’[9]

Development of Key Performance Indicators

2.13Early after its establishment in March 2011, the committee expressed
interest in receiving a regular NBN rollout performance update from the NBN Co
and Shareholder Ministers or the DBCDE.

2.14At a meeting in May 2011 with the NBN Co and the DBCDE, the committee
expressed its interest in participating in the consideration and development of
the content of the Performance Report as well as the relevant KPIs and measures
that would be included in its Second Report.

2.15At the committee’s 5 July 2011 public hearing, the NBN Co indicated that
it had been working closely with the Government to develop KPIs. The NBN Co
stated that, once this process was complete, the Government would consult with
the committee to determine the KPIs on which it would seek data. The NBN Co
stated:

We have been working closely with the Government on a range
of KPIs. My understanding is that the instructions to us from the Government
are that when that is established the Government will liaise with the committee
to find which of those KPIs you would be interested in seeing.[10]

2.16In correspondence to the committee dated 7 July 2011, the Shareholder
Ministers stated that the NBN Co was in the process of finalising ‘an
appropriate reporting framework including KPIs on NBN Co’s activities
which could be used as the basis for reports to both the Government and the
committee.’[11]

2.17At the committee’s 13 October 2011 public hearing, in regard to the
types of information provided in the Performance Report, the DBCDE stated that,
as a starting point, it had included information that was requested earlier by
the committee, and that it would build on this information in future reports.
The DBCDE stated:

On the performance benchmarks, there was a presentation to
this committee in June, I think. I was not present personally but I understand
there was a discussion about a proposal from Commonwealth officials then about
what might be included in the report. That has been the base for this report
and for subsequent reports. As the note to the KPI says, the material becomes
more meaningful as it is added to and developed over time. If
there are areas in which the committee would like reporting, you are very free
of course to ask the Government for reports on those and the Minister would
consider those, I am sure. This is a start rather than the steady set of
reporting arrangements.[12]

2.18The committee was also informed that it was not receiving from the
Government via the DBCDE, the same type of information, in the same format as
the NBN Co was reporting to the Shareholder Ministers.[13]

2.19When asked about the points of difference in the reporting information
received by the Shareholder Ministers from the NBN Co and that subsequently
provided to the committee by the Shareholder Ministers, the DBCDE stated:

On the content that you have been provided, the company
provided a quarterly report to the government as shareholder. The Government
considered that and has deleted some material that would not normally be
provided publicly—and was not provided in the corporate plan that was released
last December—such as commercially sensitive material about risks that the
company is facing and some forward looking material. Because of the passage of
time there was, as you have noted, a month between the arrival of the report
and its provision to the committee. There was also some additional material
added to pick up developments over that period. That explains almost all the
changes that were made.[14]

Key Features of the Performance Report

Content and Format

2.20The Government’s Performance Report is presented as a mix of qualitative
and quantitative information on the NBN rollout, covering the financial year
ended on 30 June 2011. In particular, the Performance Report includes
information in the following broad categories:

nCommercial
Negotiations and Events which includes information about the Telstra and
Optus Binding Definitive Agreements, the Commonwealth Funding Agreement between
the NBN Co and the Government, and communication.

nOperational
Achievements which includes product definition.

nNetworks which
includes data on the progress of the NBN rollout to specific first release and
second release sites across the three technologies of fibre, wireless and
satellite.

nRegulatory and
legal matters, including developments in consideration by the Australian
Competition and Consumer Commission (ACCC) of the Telstra and Optus Binding
Definitive Agreements, the Telstra Structural Separation Undertaking (SSU) and
Customer Migration Plan and the Wholesale Broadband Agreement (WBA), and an update
on the negotiations over the Long Term Satellite Service (LTSS) with the
Australian Communications and Media Authority.

nRisks, including
identified risks relating to safety, quality, the Telstra and Optus Agreements,
construction, revenue, operational support systems and Greenfields.

nUnaudited
Financials which includes information about the NBN Corporate Plan, and the
NBN Co’s financial result and tax treatment.

nPost Closing
Events which outlines a series of events which occurred throughout July,
August and September 2011, covering the period between end of June and when the
committee received the Performance Report.[15]

2.21In its introduction letter to the Performance Report, the Shareholder
Ministers stated that initially some information contained within the report
may be limited as NBN Co is in the early stages of the NBN rollout. In
addition, Shareholder Ministers stated the ‘report is consistent with a start
up company in the early years of the rollout.’[16]

2.22The Shareholder Ministers advised:

...the information will become more detailed as the rollout
progresses, as more premises are connected and as NBN Co’s operating and
business systems come online during 2012.[17]

2.23Further to the information on NBN rollout contained in the Performance
Report, at the hearing on 13 October 2011, the NBN Co provided the committee
with further updates on the progress of the NBN rollout.[18]

2.24Supplementary information was presented in a graphs and maps format and
included:

nThe NBN Co’s progress
of the NBN rollout in:

->second
release sites;

->progress
on the interim satellite service (ISS);

->first
release wireless sites; and

->information
on new developments.

nInformation about
access seeker innovation and changing business models

ncomparative
information about bundled pricing between the NBN’s 12 Mega bit per second
(Mbps) product and the currently available ADSL2+ product and broadband usage.[19]

Key Milestones Achieved

2.25Over the period ended 30 June 2011, the key milestones achieved in
support of the rollout of the NBN were:

n‘Execution of
mission-critical agreements’ with Telstra and Optus.

n‘Securing a funding
agreement from the Government covering the anticipated $27.5 billion equity to
be provided by the Government shareholders over time.

nConclusion of the
first major construction contract with Silcar Pty Ltd.

nThe first switch-on
of the NBN on mainland Australia, in Armidale, NSW.

nFirst Release
Satellite launch.

nCommencement of
construction in a further seven Tasmania stage two sites.’[20]

Key Performance Indicators

2.26The NBN Co Corporate Plan lists a ‘number of specific high level
deployment targets to be achieved by 30 June 2013’ which are stated as
incremental year-on-year figures for June 2011, 2012 and 2013, under the two
broad categories of:

nWireless with
premises covered, premises connected and activated, uptake and premises in
areas under construction.

2.31A table of the Corporate KPIs appears at the back of the Performance
Report and includes data under two main headings:

nHealth, Safety and
Environment; and

nDeployment.

2.32These areas are further categorised to reflect information relevant to
the NBN rollout in comparison to the NBN Co Corporate Plan target (which is
restated where this target exists).[25]

National Broadband Network Rollout Progress

2.33In the First Report, the committee reported on the figures it had
received from NBN Co in relation to the targets outlined in its Corporate Plan.
These figures showed that NBN Co had met and exceeded its published targets for
premises passed in Brownfields, and number of premises served through the ISS within
the expected timeframe to end June 2011.

2.34The legislation dealing with Telstra and NBN Co’s responsibilities for
Greenfields has now been passed by the Parliament. There has also been a subsequent
change in the Greenfields model, from a supply model to a demand model. The
target for lots passed for 2010-11 was revised from the NBN Co Corporate Plan
of 45 000 lots passed, to approximately 65 000 lots passed and 40 000
premises connected.[26]

2.35In an update on the NBN rollout, the NBN Co stated that it was preparing
for a volume rollout which would mean passing up to 6000 homes per day at full
capacity.[27]

2.36By September 2011, the NBN Co had also completed construction and
testing in the five first-release mainland sites, and launched the ISS.[28]

2.37In addition to meeting and exceeding the expected June 2011 target of
13 000 FTTP Brownfields with 14 000 premises reached by that date, the NBN
Co stated that it had now passed more than 18 000 premises.[29]
Of the FTTP Brownfields, 622 premises were connected and activated.[30]

2.39Earlier in June 2011, NBN Co had awarded a major contract for its fixed
wireless project and services were switched on in a number of first release sites,
with commercial services for these having begun on 1 October 2011.[32]

2.40The NBN Co also provided an update on the construction contracts that it
had entered into for the deployment of fibre. The NBN Co stated that while work
was well under way in most parts of Australia, contracts for South Australia
and the Northern Territory were expected to be finalised ‘in the near future’.[33]

2.41The NBN Co stated that satellite services were growing fast, with over
2000 end users having registered for the service, and close to 1000 of these
services to be either active or awaiting activation by the end of September
2011. The two high capacity satellites which will provide a LTSS are expected
to be operational by mid 2015, until which time the ISS is scheduled to operate.
The tender process for the space segment of the LTSS was to begin on 6
September, with the ground component tender process expected to be undertaken
shortly after this time.[34]

2.42In regard to progress on fibre deployment in new developments or
Greenfields, the NBN Co stated that it had switched on the first NBN Greenfield
site of Bunya in Western Sydney. With respect to the laying of fibre in
Greenfield sites, the NBN Co stated:

We estimate that more than 1.9 million new premises will be
constructed across Australia during the life of the NBN rollout. As I mentioned,
we have received more than 2 200 new development applications for fibre
infrastructure nationally. This represents some 176 000 premises. We continue
to receive about 50 new applications each week. Simultaneously with Bunya, as
part of our new development rollout, we have rolled out fibre in two other new
developments in New South Wales and we plan to switch on fibre in new developments
in Victoria, Queensland, Western Australia and South Australia this month.[35]

2.43Following comments made by the NBN Co, the Performance Report provided additional
information on the NBN rollout.

Fibre Rollout – First Release Sites

2.44The rollout information in Tables 2.1, 2.2, 2.3 and 2.4 provides an
update on how the NBN fibre rollout is progressing across the five first
release sites, in Tasmania for stages one and two, and for Greenfields.

2.45Up until and including 30 June 2011, the first release sites had moved
into the ‘transition and closure phase’, which includes a ‘post implementation
review’ with the aim of examining quality of outcomes and incorporating lessons
learned for ‘subsequent projects.’[36]

2.46The first customer trials by iiNet, Internode, iPrimus and Telstra
commenced in Armidale, NSW on 18 April 2011.[37]

2.48Table 2.2 shows 3987 premises were passed in the Tasmania stage one FTTP
deployment with 761 services delivered to 633 premises, with 604 of these
premises active.[39]

2.49In addition, backhaul links were established between Hobart and both
Smithton and Scottsdale and the first multicast service was provided to an
end-user.[40]

Table 2.2 Fibre-to-the-Premise –
Tasmania Stage One

Number

Services

761

Premises ordered

633

Premises active

604

Premises passed

3987

Source Performance
Report 30 June 2011, Networks, p. 3.

2.50Table 2.3 shows construction start dates for locations for the Tasmania Stage
Two fibre rollout. The seven Tasmania Stage Two sites include approximately
11 150 homes and businesses. The rolling construction schedule ‘applied in
Tasmania Stage Two makes the most efficient use of the workforce given the
geographic spread of the locations.’ Depending on the size of site,
construction in each site is expected to take between four and six months.[41]

Table 2.3 Fibre-to-the-Premise
– Tasmania Stage Two

Location

Premises – approx

Construction Start Date (approval of detailed design)

Deloraine

1400

Commenced

George Town

2600

Commenced

Sorell

1500

Commenced

Triabunna

500

Commenced

Kingston Beach

950

Mid October

St Helens

2200

Late October

South Hobart

2000

Late October

Source Performance
Report 30 June 2011, Networks, p. 4.

2.51As indicated in Table 2.4, as at 30 June 2011, NBN Co had received
approximately 1700 applications from developers for the laying of fibre in new
developments, with 1188 active applications covering approximately 75 000 lots,
with 403 developer contracts signed. The NBN Co determined that approximately
300 Fibre Access Node (FAN) sites would need to be built and ‘connected via
leased interim managed backhaul.’[42]

2.52On 13 May 2011, Fujitsu Australia was appointed as a ‘prime partner’ to
‘manage the design, construction and associated works for the deployment of
fibre to new developments.’[43]

Table 2.4 Fibre-to-the-Premise
Greenfields

Number

Developer applications (approx.)

1700

Active applications

1188

Total lots

75 000

Contracts signed

403

Source Performance Report 30 June
2011, Networks, p. 5.

Wireless

2.53On 1 June 2011, NBN Co entered into a contract with Ericcson for the supply
and managed services for wireless. The NBN Co also announced that it was
planning to complete its fixed wireless service in rural and regional areas by
2015, with the first services available from 2012.[44]

2.54As of 30 June 2011, design for the fixed wireless network had begun,
with purchase orders issued for the first three to four clusters or areas.[45]

Satellite

2.55First release contracts with Optus and IPStar were finalised on 6 May
2011 to enable a wholesale ISS (with capability of peak download speeds of up
to 6Mbps) to be launched.[46]

2.56At the end of May 2011, the NBN Co released detailed eligibility
criteria for rural and remote users of the ISS which would ensure that those
with no alternative broadband access would be given priority, subject to a
service qualification process. A similar qualification used under the outgoing
Australian Broadband Guarantee Program would be applied to the ISS
qualification process.[47]

2.57In addition, interoperability testing with various providers was
completed and evaluation of the LTSS sourcing plan was progressed ‘with updated
requirement specifications.’ [48]

2.58Further discussion on satellite services is included in Chapter 4.

NBN Co Financial Results

2.59The key financial results[49] summarised in the
Performance Report state that operating expenses over the period were $356
million, which was $47 million (or around 15 per cent) higher than stated
in the NBN Co Corporate Plan of $309 million. Capital expenses were $463
million, which was $957 million (or around 66 per cent) less than stated
in the NBN Co Corporate Plan of $1420 million.[50]

2.60The NBN Co experienced a consolidated operating loss of $323 million for
the twelve months ended 30 June 2011, ‘with no operational revenues.’ The operating
loss was attributed to:

2.61The financial results are attributed to the greater outlay in operating expenditure
on a ‘change in approach to Greenfields for managed services, and $8 million of
unbudgeted costs associated with the Telstra and Optus transactions.’[52]

2.62The variance in capital expenditure is mainly attributed to ‘corporate
IT systems and operational facilities, and limited investment in the rollout.’
The Performance Report states that ‘this is partly due to the delays in signing
the Telstra Definitive Agreement and timeliness selection and evaluation’ of
the LTSS.[53]

2.63In regard to capital expenditure, the Performance Report states:

Total capital costs incurred over the past twelve months are
$463m with the rollout of the Fibre network amounting to $85m, and $118m spent
on the Satellite and Wireless solutions, predominantly on the 2.3GHz wireless
spectrum. A total of $198m was spent on Systems and Processes, including Data
Centres, National Support and Operations Centre, [Business Support Systems] and
[Operational Support Systems].[54]

2.64Following equity injections of $1050 million, cash flow increased to
$326 million over the previous twelve months. Net assets also increased by $727
million with the cash component (as stated above) accounting for approximately 45
per cent of the total.[55]

2.65The Performance Report does not include a tax expense for NBN Co as the
‘company expects to be in a tax loss situation for at least the current financial
year.’ The Performance Report also states the deferred tax associated with the
loss will only be realised in the future ‘when it becomes probable that future
taxable profits will allow the tax losses to be utilised subject to loss
recoupment rules.’[56]

2.66The Performance Report provided an update of the negotiations and events
in regard to the Telstra and Optus Binding Definitive Agreements and an update
on the ACCC’s consideration of Telstra’s Structural Separation Undertaking
(SSU), the NBN Co’s WBA and SAU. Discussion on these matters is included in
Chapter 3 of this report.

Other Issues

Release of Twelve Month and Three Year NBN Rollout
Schedule

2.67On 20 September 2011, the NBN Co advised that it was planning to release
a schedule detailing the NBN rollout sites for the next 12 month period with
the intention to release a three-year indicative NBN rollout plan early in
2012.[57]

2.68The 12 month NBN rollout schedule was released on 18 October 2011.
The 12 month schedule outlined the construction plan for specified areas in
jurisdictions across Australia where work on the NBN rollout ‘will begin
between now and September 2012, as well as where work on the rollout of the
network is currently underway.’[58]

2.69The 12-month NBN rollout schedule is expected to be updated quarterly to
include additional locations. The NBN Co had indicated that it will take ‘12
months from the start of the fibre network rollout in a given area until
individuals are able to receive high-speed broadband over the NBN.’[59]

2.70The NBN Co commented that it was not possible to specify beyond a 12-month
period the exact rollout timeframe down to the level of street and premises
until detailed design had been undertaken on the ground in an area. However,
the NBN Co stated that it would make announcements after it was ‘reasonably
confident’ it had finalised them. The NBN Co also stated that:

What we will probably try and do is announce things as soon
as we have reasonably confidently finalised them. As I said, within the next
couple of weeks, we will be releasing information on everything that is going
to be started within the next 12 months. Then there is a lead time of course
until it is finished, so it will be closer to 24 months till all of those sites
are completed. So everything that is going to be started in the next 12 months
we will release that information. We will then look at everything that is going
to be started in the next three years, but the latter two years of that are not
as certain. They are indicative—they are our plans at this point in time—but we
want to make sure people understand those latter two years are indicative. It
is not our intention to try to release the whole 10 years at this point in
time, because we simply have not got that far in the planning.[60]

NBN Co Workforce

2.71The Performance Report outlines the human resource component of the NBN
Co. Table 2.5 shows the breakdown of employees across the various branches of
the NBN Co as at 30 June 2011, and Table 2.6 shows the breakdown of these employees
by jurisdiction.

Table 2.5 NBN Co Staff
Resources as at 30 June 2011

Headcount

June 11 Actual

Operations

Construction

98

Network Operations

224

Technology

182

Commercial Strategy

25

Product Development & Sales

67

TOTAL Operations Staff

596

Sales, General & Administration (S, G & A)

Network Operations – CIO

124

All Other S, G & A

286

TOTALS, G&A Staff

310

TOTAL Headcount (including Contractors)

906

Source Performance
Report 30 June 2011, Resources, People, p. 8.

Table 2.6 NBN Co Employees by
State and Territory as at 30 June 2011

State/Territory

Number of Employees

Australian Capital Territory

3

New South Wales

440

Northern Territory

0

Queensland

22

South Australia

9

Tasmania

5

Victoria

422

Western Australia

5

Source Performance
Report 30 June 2011, Resources, People, p. 8.

2.72On 24 August 2011, in preparation for volume rollout of the NBN,
NBN Co had undergone a restructure involving changes to senior management.
These changes reflected the incorporation of the lessons learned through its
detailed planning process during the trial phase of NBN rollout. Of this restructure,
the Chief Executive Officer, Mr Mike Quigley stated:

There have been some recent events within the company related
to restructure. That happened on 24 August and involved some senior management
changes. There has been a lot of media speculation about this, but I want to
emphasise that the reason the restructure took place is because NBN Co. has
grown from a start-up—literally from nothing—to now having over 1,000 employees
in locations across Australia. We have completed testing in a number of areas
and have incorporated those lessons into our detailed planning in preparation
for volume rollout. Basically, we are entering a new phase of our business and
the structure of the company needs to reflect that. The changes that I
announced in the restructure were driven by the move from a planning, testing
and refining design phase to an implementation and construction phase. We are
preparing the company for the rollout across Australia.[61]

2.73The restructure also included the creation of a new communication unit
within the NBN Co which is responsible for arranging information days with
towns and areas about the NBN. Mr Mike Quigley stated:

As part of the restructure I did we are putting in place
inside the company a unit where that is its job, to go out ahead of the rollout
and hold town hall meetings, meetings in local libraries and information days.
We are mobilising many councils, universities and other people who are very
keen for this rollout to take place. It is quite encouraging to see how many
people external to NBN Co. are keen to try to get the message out. We will be
leveraging as much of that as we can, so as well as the electronic means we
will actually have people with feet on the street talking to local councils,
holding town hall meetings and doing similar things.[62]

Demand for Wireless

2.74According to figures by the Australian Bureau of Statistics (ABS), the
number of mobile broadband subscribers in Australia is continuing to climb.[63]
NBN Co found that these ABS results indicate that the number of fixed broadband
subscribers is also increasing, but at a much slower rate (Figure 2.1). Yet, the
average amount of downloads per month in gigabytes has doubled in the last 12
months for fixed-line networks, whereas on the mobile network the average
download for a broadband subscriber has dropped by 20 per cent (Figure 2.2).

Figure 2.7 Rate of fixed
broadband and mobile access subscribers

Source NBN
Co, Submission
2.4 Attachment 1.

Figure 2.8 Data downloads via fixed
networks and mobile access

Source NBN
Co, Submission
2.4 Attachment 1.

2.75This data indicates that increasingly, portable devices such as smart
phones and tablets are connecting to fixed-line wireless networks and relying
less on networks such as the 3G network. The NBN Co stated that this ‘is
consistent with what is being seen around the world [and] is a trend we expect
will continue’.[64] Further, Mr Mike Quigley
stated:

I was speaking to the folks from Ericcson just the other day
and they told me their prediction for 2016. When looking at total worldwide
broadband data downloads they expect the amount of traffic on mobile broadband
to be one half of one per cent of fixed line network traffic by 2016 ... What
that says is what we all expect. We expect the number of connected devices to
keep going up very rapidly. In fact in our first release sites we have measured
the number of connected devices to be five on average, and Cisco are predicting
that to be close to seven or eight on a worldwide basis by 2020. We expect the
number of devices to go up, but the heavy lifting of applications other than
voice is going to be done on fibre-based networks. We are seeing that same
message coming from France Telecom, from operators like Shaw. Juniper Research
I think recently estimated that there would be a seven-fold increase in the
cost of just trying to keep up with the basic data that is being downloaded on
wireless.

2.76The NBN Co advised that the industry is planning for the demands created
by this trend and stated:

There are only two things you can do: you can get more
spectrum or you can build more cell sites. Building more cell sites, however,
is becoming increasingly difficult in many parts of the world.[65]

2.77Commenting on the evolution, effectiveness and capacity of fibre and
wireless technologies, the NBN Co stated:

[Wireless] technology, as you would expect, continues to
evolve and the peak speeds will continue to go up. The issue with wireless
technologies is not peak speed. The issue is capacities—how much can you
download per subscriber in the busy hour? That is the issue that you have to
face when you are looking at wireless technologies and, if you want to get a
reasonable amount of download capacity then wireless in fact becomes more
expensive than fibre. You cannot do too much with wireless and those sorts of
capacities without it becoming very expensive, which is why the crossover took
place between fibre and wireless.[66]

2.78Additionally, the NBN Co commented that wireless has benefits of
mobility, whilst fixed line is good for high-capacity downloads. The NBN Co
stated that:

Wireless is very
good for mobility and fixed line is very good for high-capacity download and
video and that is why you need both technologies.[67]

2.79In summation, the NBN will include both wireless technologies and
fixed-line fibre. The NBN wireless footprint will use leading next-generation
4G technologies whilst delivering increased capacity under fibre deployments to
97 per cent of Australian premises to meet the increasing demands in the market
as indicated by ABS statistics. [68]

Concluding Comments

National Broadband Network Rollout Progress

2.80While the committee expresses its disappointment that the Government’s
Performance Report was received after its scheduled public hearing on
20 September 2011, it appreciates having received the Performance Report
and the list of post closing events. The Corporate KPIs listed at the back of
the Performance Report provide a useful snapshot of NBN rollout progress across
the three technologies of fibre, satellite and wireless.

2.81The NBN Co advised the committee that it has met and exceeded its
targets for fibre and satellite rollout.

2.82The committee understands that the content and size of the Performance
Report reflects the early stages of the NBN rollout and that the NBN Co is
still in its start-up phase, with employee numbers growing as the company gears
up for volume rollout of the NBN. However, the committee was expecting more
detailed information about the progress of the NBN rollout in a table format,
across the three technologies to enable it to compare results between years.

2.83The committee notes NBN Co’s financial position as presented in the
Performance Report and acknowledges that the NBN rollout is in its start-up
phase, is not collecting revenue as yet from Retail Service Providers and so
has experienced a consolidated operating loss of $323 million for the year
ended 30 June 2011.

2.84In view of concerns received during the course of the previous review
from various groups about the timing for receiving the NBN, the committee
welcomes NBN Co’s approach to publishing a twelve month NBN rollout schedule and
its plan to publish a three year NBN rollout schedule. The committee is of the
view that this will provide certainty for the community and industry about the
timing and site selection for the NBN rollout.

Development of Key Performance Indicators

2.85The committee met with the NBN Co and the DBCDE in May 2011 and
discussed a possible role for it in determining the types of NBN rollout
information and KPIs on which it would like further information.

2.86The committee was not formally approached again to provide any comment
on the type of content and format for the Performance Report and would welcome
such a discussion prior to the receiving the next Performance Report.

2.87The committee will write to Shareholder Ministers during the next review
period to ascertain how it can participate in shaping the type of information
and format of the next Performance Report to enable it to undertake its role in
review of the NBN rollout.

Answers to questions taken on notice

2.88Given the high importance placed on and large investment in the NBN, the
committee is again drawing attention to the inability of the DBCDE and the NBN
Co to adhere to notified timeframes for the committee’s receipt of answers to
questions.

2.89As highlighted in the First Report, the committee received answers to questions
taken on notice well outside of the notified timeframe. This has been the committee’s
experience for questions taken on notice by the DBCDE and the NBN Co for the hearings
held on and after 13 October 2011.

2.90The committee reiterates the comments it made previously: that adherence
to timeframes for receiving answers to questions on notice allows the committee
to include relevant formal evidence in its report; and often provides useful
evidence, further informing its findings and recommendations.

2.91In addition, allowing for the fact that the overall planning,
development and rollout of the NBN is at an early stage, the committee is
concerned about both the quantity and especially the quality of the evidence
that it has received in response to questions taken on notice by the DBCDE and the
NBN Co. For a number of answers, it seemed that only material that was already
available publicly, or evidence already taken at public hearings, was provided.

2.92This approach does not assist the committee to fulfil its role properly
and use its time productively. The committee suggests that, where possible,
timeframes be reasonably met with information answering in more depth questions
placed on notice by members of the committee.

Recommendation 1

2.93

The committee recommends that where possible tables and
graphs be used in the Government’s Six Monthly National Broadband Rollout
Performance Report to enable information to be compared across years.

Recommendation 2

2.94

The committee recommends that the Department of Broadband,
Communications and the Digital Economy review its existing clearance processes
for providing answers to questions on notice with the aim of providing
answers to questions taken on notice where possible on the notified due date
or within a reasonable timeframe thereafter.